THE DEBT HOAX:

Crocodile Tears: THE RIGHT'S PHONY OUTRAGE OVER DEFICITS (Jonathan Chait , 02.23.04, New Republic)

, the most expensive spending programs under Bush have been for defense, homeland security, and international aid. None of these areas has grown fat. To the contrary, the military is overstretched, homeland security underfunded, and aid programs to build strong governments and civil societies that can resist radical Islam woefully inadequate. Still, if you add up the cost of all the legislation enacted since Bush took office--as the Center on Budget and Policy Priorities did--these three areas account for 30 percent of that cost. New entitlements account for 13 percent, and, with the Medicare benefit projected to grow, that share will increase over time. But, rather than tackle these areas of spending--or address the elephant in the living room, the president's tax cuts, which account for 55 percent of the "cost" of legislation under Bush (more on this later)--conservatives have focused the brunt of their fiscal wrath upon a relatively small and innocuous slice of the federal budget called domestic discretionary spending. 

Discretionary spending includes everything the government does other than entitlements, defense, and interest on the national debt. All of this--from national highways to scientific research to public housing--accounts for a mere 17 percent of the overall budget. It makes up a still smaller 3 percent of the total cost of legislation passed under Bush, and its impact on the budget pales beside the tax cuts. But, because many of these programs lack strong political constituencies--at least when compared with heavyweights like Medicare--they are taking the brunt of the conservative attack. Heritage paints the growth in discretionary spending as insidious: "[N]on-defense discretionary spending," argues its December backgrounder, "has reached 3.9 percent of GDP ($3,900 per household) for the first time in nearly 20 years." But most of that increase has come from homeland security. The Center for American Progress found that, over the last decade, domestic programs unrelated to security have grown from 3.3 percent of GDP to--da-dum!--3.4 percent of GDP. 

Trying to balance the budget by squeezing domestic discretionary spending is like trying to lose weight by giving up that slice of tomato on your cheeseburger. Not that Republicans aren't trying anyway: GOP leaders have proposed a total freeze on discretionary spending this year. Doing so would save $2 billion. To grasp the absurdity of that effort, keep in mind that this year's deficit is expected to top $500 billion. Even if Congress persuaded Bush to completely eliminate all discretionary programs including homeland security, that would still leave Washington with $137 billion in red ink. 

The big picture, then, is this: Overall spending has crept up a bit, now taking up 1.6 percent more of the economy than it did when Bush took office, but it remains modest by modern standards. The really spectacular change is in tax revenue, which has fallen from 20.9 percent to 15.8 percent of GDP since Bush took office. The collapse in revenue, in other words, has been more than three times the growth in spending. This year, revenue will account for a smaller share of the economy than in any year since 1950. Now, it's true that much of that revenue loss stems from broader economic factors, not just tax cuts. But, even if you look only at deficit increases caused directly by legislative action, the cost of the tax cuts is still nearly five times the size of all the non-security spending increases and accounts for more than all new spending (defense, homeland security, and domestic) put together. 

Revenue is headed in the right direction and the national security costs are a temporary phenomenon. The key is to get control over entitlements in the long run--the debt doesn't matter at all in the short run--and that means the kind of privatizing of public services and the safety net that the President is effecting through things like the vouchers in NCLB, enacting the Faith-Based Initiative through executoive orders, farming out formerly civil service jobs to the prtivate sector, and the Healh Savings Accounts in the Medicare reform law. Next term it will be individual accounts for Social Security. Once this infrastructure is in place and the GOP has a filibuster-proof majority in the Senate it's easy enough to move all these nascent programs toward a thoroughgoing transformation into an Opportunity Society/compassioonate conservative/Third Way/ New Democrat-type privatized, market-based welfare state, providing people with the security they demand but the maximum degree of freedom possible given that constraint.

Posted by Orrin Judd at February 23, 2004 11:53 AM